Handset Replacement Rate Exceeds 80%
By Peter Arato -- TWICE, 12/22/2003
Port Washington, N.Y. — Confronting a mature U.S. market of more than 150 million subscribers, the wireless industry is shifting its attention from acquiring new subscribers to retaining them. Wireless local number portability (LNP) promises to accelerate this trend.
In this environment, competition for a finite number of subscribers is heating up, and with network features expanding way beyond voice, carriers are focusing on selling new handsets that deliver those network features and give subscribers more reasons to stick with them.
Results from the NPD Group's Cell Track service underscores the potential for using handsets as a retention tool. NPD found that 81 percent of handset sales in the January-September 2003 period were replacements. In October alone, the figure hit 84 percent.
Based on October's data, the median number of months that replacement buyers owned their prior phone was 24 months, but a third of replacement-phone buyers had their prior phone for at least three years.
What are the dynamics of such upgrades? When replacing their handset, 42 percent of consumers stay with the same brand of phone, but loyalty varies widely among key brands from 8 percent to 60 percent. As could be expected, lesser known vendors still establishing their names with U.S. consumers tended to have lower loyalty. Brand equity, therefore, is closely linked to loyalty, with 14 percent of loyal buyers regarding a trusted brand as a purchase motivator for selecting a replacement phone. A trusted brand was cited by only 6 percent of brand switchers as a purchase motivator when they switched.
Trusted brand was also the single largest differentiator between loyal buyers and switchers.
Beyond the obvious and most visible bells and whistles, such as color screens and built-in cameras, what are some of the emerging features that might push some fence sitters to upgrade? NPD Techworld data shows that:
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Handsets with polyphonic ring tones accounted for 68 percent of handsets sold in October 2003.
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Push-To-Talk, while relatively new on a wide scale, already accounted for 5 percent of handset sold during that time, and the percentage is growing.
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Models with voice recording/dialing made up 78 percent of unit sales.
NPD also found that while handsets have become more sophisticated, they have also become lighter: 88 percent of handsets sold to consumers weighed less than 5 ounces compared to only 37 percent three years ago.
Form factors have also evolved. Clamshell has emerged as a more important handset type at the expense of candy-bar form factors. NPD found that 39 percent of phones sold in October were clamshell, up from 6 percent in October 2000. In contrast, candy bars were the predominant form factor three years ago with a 75 percent share but now account for 52 percent of handsets sold.
In the coming year, slider form factors and models with flip-out keyboard could become more significant in the market, having only been introduced in 2003 in limited numbers.
NPD Group's Cell Track service combines data from a panel of retailers and online consumer surveys (heavily weighted to the latter) to reflect the total U.S. consumer market. Each week, 35,000 surveys are sent to a panel of pre-recruited individuals who have agreed to participate and have completed a comprehensive demographic questionnaire. The responding sample is demographically balanced (to restore sample proportions to U.S. census levels), then projected and calibrated, to represent the population fo people ages 13 and up.
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